UNITED STATES GOVERNMENT PRINTING OFFICE BOARD OF CONTRACT APPEALS BRENNER PRINTING COMPANY PROGRAM 1701-M, JACKET 772-742 and PROGRAM 1736-S , PURCHASE ORDER K-2954 Decision dated August 25, 1980 PANEL 3-80 JAY E. EISEN, Chairman ROBERT W. ARMENTROUT, Member RAYMOND J. GARVEY, Member I. INTRODUCTION This matter was brought before the Contract Appeals Board as a result of appeals dated May 23, 1979 and May 29, 1979, relative to Program 1701-M, Jacket 772-742 and Program 1736-S, Purchase Order K-2954, respectively, by Brenner Printing Company, 14 Burwood Lane, San Antonio, Texas, hereinafter designated as the Contractor or Appellant. The contractor appealed termination of contracts it had with the Government Printing Office for the printing of 30,000 pamphlets, and a monthly newspaper for the Department of the Army and Air Force, respectively under Purchase Order K-2450, Program 1701-M, Print Order 38, Jacket No. 772-742 and Program 1736-S, Purchase Order K-2954, Jacket 671-024. The two timely appeals are consolidated. The background for the two contracts involved in the two contracts will be outlined below. II. PROCEDURE ON APPEALS Site of Hearing Government Printing Office Instruction 110-10, titled Board of Contract Rules of Practice and Procedures provides that hearings are held at the U.S. Government Printing Office, Washington, D C, except that upon request reasonably made and upon good cause shown, the Special Projects Officer in his discretion may set the hearing at another location. The Board of Contract Appeals by letter dated May 15, 1980, notified the contractor that a review of the file failed to reflect an election to be heard and submit evidence in one of the following procedures: (1) Upon submission of the written record only (Par. 12, GPO Instruction 110.10) or (2) At an informal hearing (Par. 13, GPO Instruction 110.10). The Board, anticipating the contractor's election to be held based on correspondence in the file, scheduled a hearing to convene in Washington, D C, on June 10, 1980. The contractor responded by letter dated May 30, 1980, wherein he stated inter alia that he was financially unable to attend, but would be willing to attend in person in the event that the hearing could be held within a day's drive of San Antonio. The contractor's place of business is located in San Antonio, Texas. The Board of Contract Appeals responded by letter dated June 17, 1980, to the effect that good cause was not shown by the contractor as to his inability to attend the hearing because of financial reasons and that the Board is rescheduling the informal hearing in Washington, DC, to convene on July 10, 1980. The contractor responded by letter dated June 26, 1980, that because of lack of funds will not be able to attend on July 10, 1980. The contractor did not elect to submit its appeal on the record only pursuant to Paragraph 12, GPO Instruction 110.10. The Board of Contract Appeals informally convened on July 7, 1980, and arrived at the conclusion that the appellant has not supported its position by any compelling evidence of financial instability to warrant the hearing to be held in Texas. On July 7, 1980, this matter was discussed with the successor to the Special Projects Officer, the Assistant Public Printer (Planning), who concurred that the contractor has not shown good cause to warrant convening the hearing in Texas. John H. Moon & Sons, IBCA, 70-1 BCA ¶ 8280 (1970). The appellant was advised by letter, July 15, 1980, that his unexcused absence from the hearing leaves the Board no recourse but to decide the case on the written record as submitted by both parties. In view of appellant's failure to appear at the hearing in person or by an attorney and thus derive the maximum benefit from being confronted by Government witnesses for purposes of cross-examination, we feel that no good purpose would be served by scheduling a hearing before the Board. We realize that the Government will be unable to present its case through live testimony of witnesses, just as the appellant could not examine Government witnesses, but we will examine that fact in determining the weight to be given the evidence on each side. Jack L. Sailors Company, ASBCA, 58-1 BCA ¶ 1696 (1958). III. FINDINGS OF FACT A. Appeal of Brenner Printing Co., Program 1701-M, Jacket 772-742,, Print Order 38. The appeal was taken pursuant to Article 29 (disputes clause) of U.S. Government Printing Office Contract Terms No. 1, approved July 1, 1943, revised July 15, 1970, which was integrated as part of the Contract, Jacket 772-742. On July 3, 1978, a Printing and Binding Requisition was received by the Regional Printing Procurement Office, Dallas, Texas, as (hereafter Dallas RPPO) from the Department of the Army, Fort Sill, Oklahoma, for the procurement of 30,000 pamphlets titled, "Field Artillery The Career with a Future," Print Order 38, Program 1701-M, 8/1/77 to 7/31/78 was offered to the Brenner Printing Company, San Antonio, Texas. Their quotation was accepted by the Government on July 7, 1978, and Purchase Order K-2450 was issued to the appellant on July 12, 1978. The pamphlet was designed for a trim size 7 7/8" X 10 1/4", black ink on 100 pound vellum stock, a finished cover and 3 holes drilled for insertion in a binder. The estimated cost of the contract was $7,908.90. The Print Order indicated a shipping date of August 11, 1978, with full delivery to the Transportation Officer, Fort Sill, Oklahoma. (AF. Ex. 6,8). A change order was issued to the appellant by the Procurement Officer, DRPPO on August 14, 1978, to the effect that the contractor was authorized to make and furnish one set of proofs (AF., Ex. 11). The proofs, upon being forwarded to Fort Sill for inspection revealed that the pages had been improperly imposed, causing the margins to be incorrect. An additional set of proofs was requested by Fort Sill, which was provided by the contractor, for the purpose of altering by the Department and then to be returned to the contractor to show the correct imposition of the pages. The altered set of proofs showing correct imposition was received on September 7, 1978, in Dallas RPPO and forwarded to the contractor with a letter of transmittal dated September 7, 1989, providing for the notation, "approved to print with corrections as marked." (AF. Ex. 17). The appellant printed the pamphlets and the Department of the Army acknowledged delivery at Fort Sill, Oklahoma, on November 2, 1978. The Director, AFPP, Fort Sill, Oklahoma, in a letter to Dallas RPPO, dated November 7, 1978, indicated that the job should be rejected because of the very poor quality printing and binding provided by the contractor. Seven samples, picked at random were submitted to substantiate the complaint. The reasons given for their rejection were: 1) Page imposition was inconsistent. 2) Pages 54 and 55 positioned too far apart. 3) Poor binding. The Department of the Army requested that the job be reprinted correctly and delivered to Fort Sill by November 17, 1978. The contractor was advised that the Department of the Army consider the job unusable. (AF. Ex. 18,19). The appellant was notified by a telecommunication on February 22, 1979, by Mr. Charles C. Booth, Contracting Officer's representative as confirmed by letter dated February 23, 1979, inviting him to witness an inspection of the pamphlets procured from his firm (Jacket 772-742, Program 1701-M, Print Order 38) at Fort Sill, Oklahoma. Mr. Emery Brenner, the contractor, declined to appear and witness the inspection. (AF. Ex. 20, 21). A quality assurance inspection at Fort Sill, Oklahoma, was performed by Dallas RPPO on February 26, 1979, of the entire shipment of the United States Army Field Artillery pamphlets. Samples were taken and the inspection was conducted in accordance with a Multiple Sampling Plan of the shipment of 279 cartons with about 101 pamphlets per carton on 7 skids. The following procedure was used for a random sampling of the 30,411 pamphlets: 1. The skids were numbered 1-7. 2. One carton was randomly selected from each skid and labeled "A". 3. Five pamphlets were randomly selected from each carton and labeled 1-5. 4. This procedure was repeated throughout four samplings. The cartons from each sampling were set aside to insure that different cartons would be selected for each sampling. A pamphlet labeled 1-A-5 would be the 5th pamphlet of the first sampling from a carton selected from skid No. 1. Inspection of the shipment in accordance with the above sampling procedure revealed that: 1. A background tone screen approximately 7 1/3" X 11/16" was omitted from page 21. 2. Extraneous marks, i.e., oil spots, scum, etc., were prevalent throughout; particularly register targets printed on pages 40 and 47. 3. The trim is inconsistent throughout. The samples varied as much as 1/4" in width and some image loss occurs on the outside trim. 4. The margins are inconsistent throughout and are not maintained at 1/2" from the outside trim as specified. 5. The drilling is inconsistent throughout with some of the holes being drilled in the fold line. On March 1, 1979, the contracting officer determined that the defects rendered the pamphlets unacceptable and that the order be rejected in its entirety. The contracting officer requested that the appellant reprint the entire order at no additional expense to the Government and ship no later than April 24, 1979, after receipt of notice. (AF., Exhibits 22-36, 37, 39). Prior to the final termination notice of April 19, 1979, the contractor had written to the Dallas, RPPO by letter dated April 10, 1979, wherein he stated inter alia, that shipment of 30,411 books to Fort Sill, Oklahoma, in 279 cartons was made on October 24, 1978, and that on January 22, 1979, he received full payment from GPO in the amount of $7,345.85. He contended that there was a sufficient time interval between October 24, 1979, and January 22, 1979, to allow for whatever inspection and rejection that might have been found appropriate. In addition, it was asserted that pursuant to his request of the rejected books, Dallas RPPO shipped to his plant on or about March 28, 1979, 3,024 books and that appellant's individual inspection as compared with a reprint sample book revealed 269 books that contained registration marks or other imperfections as stated in the contracting officer's letter of March 1, 1979. (AF. 40, 41). The contracting officer issued a final termination notice on April 19, 1979, upon appellant's refusal to reprint the order. This notice, after advising the appellant that the default was taken in accordance with Article 18, GPO Contract Terms No. 1, states further: "You are also advised that the same or similar items terminated, may be procured against your firm's account, on such terms and in such manner as the Contracting Officer deems appropriate. In that event, your firm shall be held liable to the Government for any excess costs. The Government reserves all rights and remedies provided by law and under the contract, in addition to charging to excess costs." The contractor disputed the decision of the Contracting Officer and the appeal dated May 23, 1979, followed. Reprocurement was effected under Jacket 673-381, Purchase Order K-7587, on April 18, 1979, with the award issued in response to a bid by telephone to P.M. Press, Inc., 1850 Empire Central, Dallas, Texas, at a cost of $17,590. B. Appeal of Brenner Printing Co., Jacket No. 671-024, Program 1736-S, Print Order No. 12. This appeal results from a timely appeal filed by Brenner Printing Co., San Antonio, Texas. The appeal was taken pursuant to Article 29, (Disputes clause) of U.S. Government Printing Office Contract Terms No. 1, approved July 1, 1943, revised July 15, 1970, which was integrated as part of the original contract. The decision of the U.S. Government Printing Office Board of Contract Appeals (the Board) is rendered in accordance with the procedures provided in Government Printing Office (GPO) Instruction 110-10, dated June 6, 1979. FINDING OF FACT Program 1736-S is a term contract beginning July 1, 1978 and ending June 30, 1979, for the production of a newspaper type publication, titled "The Air Force Recruiter" for the Air Force Recruiting Service, Randolph AFB, Texas. The newspaper was scheduled to be published monthly (12 issues) with approximately 4,500 copies per issue with manuscript copy furnished by the Government. (Af. Ex. 15). Pursuant to Brenner Printing Co.'s bid dated May 24, 1978, the contract was awarded by Dallas Regional Printing Procurement Office (GPO) to appellant with the issue of Purchase Order K-2954 on July 1, 1978, at an estimated cost of $21,877.50 (AF. Ex. 17, 20). By letter. dated April 6, 1979, the contractor notified the contracting officer that he would not perform Print Order 12 unless payment was made by GPO for prior monthly publications of the newspaper (AF. Ex. 21). On May 3, 1979, representatives of the Air Force Recruiting Services were informed by the contractor that Print Order No. 12 (April issue) would not be printed until he received payment for Print Orders No. 9 and 11. The Dallas Regional Printing Procurement Office (GPO) informed the contractor that his refusal to proceed with Print Order 12 could place the appellant in jeopardy of termination of the contract by default. The Government's refusal to pay contractor for performance in the production of two earlier monthly issues of the newspaper was due to a set-off procedure by GPO to cover excess costs as a result of the earlier default action taken against appellant under Program 1701-M, Jacket 772-742, Print Order 38 (U.S. Army Field Artillery Pamphlet). The Contracting Officer issued a final default termination notice dated May 4, 1979 (AF. Ex. 27). The notice, after advising the appellant that the default was taken in accordance with Article 18 of the GPO Contract Terms No. 1, states further: "The Government may procure upon such terms and in such manner as the Contracting Officer may deem appropriate, supplies and services similar to those so terminated, and your firm shall be liable to the Government for excess costs for such similar supplies." The appellant filed its notice of appeal, dated May 29, 1979, contending inter alia that the set-off procedure followed by the Government to satisfy an obligation claimed by the Government under another contract, Jacket 772-742, was erroneous and unreasonable. (Af. Ex. 35). The balance of the print orders remaining on Program 1736-S, namely Print Orders 12, 13, and 14 were reprocured. The excess costs resulting from the termination and reprocurement procedures amounts to a total of $540.47. IV. DISCUSSION Neither the appellant nor the contracting officer has been represented by counsel during this proceeding. As a result, the Board has had to rely solely upon its own judgment in determining the factual and legal issues which were presented in the written submissions contained in the appeal file. No oral hearing was held before the Board and no other evidence, except what is contained in the appeal file, was relied on in arriving at our decision. A. Was Print Order 38, Jacket 772-742 properly within the scope and requirements of the specifications, Program 1701-M In its notice of appeal, and other correspondence including its letter of May 30, 1980, appellant raised certain points that it wished the Board to take into consideration. These points in summary, are as follows: 1. That the contractor had offered to correct the defects found in the pamphlets which was rejected by the Government; the Government's request for reprinting the entire order at no cost to the Government was unreasonable. 2. Since the appellant received full payment in the amount of $7,345.85 on January 22, 1979, three months after the date of delivery, the Government is estopped because of the delay involved from rejecting the order in its entirety. 3. The background tone screen omitted from page 21 of the publication constitutes a minor deviation from the specification requirements and should not be a ground for rejection of the entire order. 4. The appellants inspection of 3,024 pamphlets received by him revealed that only 269 pamphlets contained imperfections, aside from the omission of the tone screens on page 21 and was not sufficient grounds for rejecting the entire shipment. The specifications for the printing of books and pamphlets under workmanship require that: "All workmanship in connection with the article or product manufactured under these specifications must be first class in every respect. All operations required such as imposition, press make ready, press running, and binding must be performed with care to insure that (1) the printing on the article or product delivered will be good, clear, and sharp with full and uniform ink coverage . . . ." The specifications provide under "Certificate of Conformance, Terms and Conditions," the following: "1. Payment of any invoice for which a completed certificate of conformance has been submitted shall not be needed to be final acceptance by the Government." . . . "3. The material shipped shall be subject to inspection and acceptance by the Government at the destination(s) within a reasonable time after delivery to determine compliance with the specifications. . . ." Under Attachment B Payments; the contract under Program 1701-M provides the following: "Warranty (a) Notwithstanding inspection and acceptance by the Government, acceptance of the Government implied in law, payment, or any provision of this contract regarding the conclusiveness thereof, the contractor warrants that: (i) All supplies furnished under this contract are free from defect in material and workmanship and conform to the specifications and all other requirements of this contract; and (ii) . . . (b) The contracting officer shall give written notice of any breach of the warranties in paragraph (a) within 180 days from the date of the check tendered as payment as set forth in (2) above. Such notice shall specify the non-conformities and the corrective action (if any) required of the contractor." Our review of the facts lead us to conclude that there really is no dispute between the parties regarding certain imperfections in the pamphlets. The appellant admits that the background tone screen omitted on page 21 of the book is lacking, but says such deficiency is a minor deviation. The contractor also admits that based on his own inspection, 269 pamphlets out of 3,024 books received by him, contained imperfections, aside from the omission of the tone screens. The Government inspection of the print order of about 36,411 books at Fort Sill, Oklahoma, was based on a multiple sampling plan of inspecting five pamphlets from each carton. The shipment consisted of 279 cartons and the Government thus does not warrant that an inspection of each book took place. However, the contracting officer conducted a systematic inspection procedure to do what is necessary and reasonable to assure the quality level of the books called for by the contract. Based on the inspection, the quality of a reasonable percentage of the books were found wanting and the Government had valid reasons for rejection. In addition to the tone screen omitted from page 21, other major defects noted from the inspection consisted of register targets printed on pages 40 and 47, poor trim, holes drilled on the fold line and other minor defects were present such as inconsistent margins and trim without information loss. Based on the evidence, it is our opinion that the pamphlets in Print Order 38 did not conform to the specifications. The Government has a right to insist upon strict compliance of supplies with contract specifications. Farwell Co v. U.S., 137 Ct. Cl. 831 (1957). There is no indication that appellant was prejudiced in any way or subjected to any additional expense by reason of the Government's delay in making the on-site inspections at Fort Sill, to which the contractor was invited to attend, 3 months after payment. Furthermore, the Government was not dilatory. It had a contract right to conduct an inspection within a reasonable time after delivery. Under the terms of the warranty provisions of the contract, the Government had a right to make an inspection and give written notice of any defects of material and workmanship within 180 days from the date of the check tendered as payment. Article 13 of GPO Contract Terms No. 1 entitled "Inspection and Tests" provides for the rejection of material which is not in conformity with the specifications. With exception which are not relevant here, see Radiation Technology, Inc. v. United States, 177 Ct. Cl. 227, 366 F.2d 1003 (1966), the Government may require strict compliance with its contract specifications or may reject the offered product and default the contractor. See American Electric Contracting Corp. v. United States, 579 F.2d 602, 608 (Ct. Cl., 1978) Branz Mechanical Contractors, Inc. VACAB No. 1105, 74-2 BCA ¶ 10,854 (1974), and cases cited therein at footnote 9 at p. 51,630. Based upon the facts as cited above and the requirements of the contract, we conclude that the contracting officer acted properly in terminating the appellant on Print Order 38, Jacket 772-742, Program 1701-M. 1/ B. Was Termination for Default of Program 1736-S Proper in Light of Contractor's Refusal to Complete and Deliver Print Order #12 The appellant claims entitlement of the amount of $2,752 representing the cost of producing the Air Force Recruiter Magazine (Program 1736-S) for issues produced for the months of January and March 1979. This sum was deducted by the Government from monies due the appellant, under a set-off for excess costs due under an earlier contract Print Order 38, Jacket 772-742. Upon the appellant's refusal to perform Print Order 12, Program 1736-S was terminated for default pursuant to Article 18, Contract Terms #1 and the balance of the print orders on the program reprocured against the contractor's account. The appellant contended that the Government breached the contract by not paying for three shipments. The appellant has not denied or disputed that it failed to perform Print Order #12. Under the circumstances of this case, the contracting officer was merely performing an administrative function authorized by the contract, to wit, terminating the contract for default. Generally, the Government has the right to a claim it has against the contractor through the withholding of funds that are otherwise payable to the contractor. In this instance, the amount of money due the Government because of the contractor's default on the previous contract under Program 1701-M could properly be withheld from a payment owed the contractor on a later contract under Program 1736-S, because the Government has the same right which belongs to every creditor to apply the unappropriated monies of his debtor in his hands in extinguishment of the debts due him. Filtron Company, Inc. DCAB, 70-1 BCA, 8086 (1970). 1/ The Board was supplied a copy of the pamphlet produced by the Appellant and a copy produced by the reprocurement contractor. Assuming, without deciding, that these books are representative of the work that was produced by both of these printers, we observe that the quality of the procurement contractors product is clearly superior to that of the appellant. We find that the appellant is refusing to perform Print Order 12, abandoned his responsibility under the contract. We further find that the contracting officer was empowered to ascertain the appellant's legal responsibility to the Government through the application of the default clause and excess costs, if any, as a result of the ensuing reprocurement process. V. DECISION Upon our review of the written record, based on our findings of fact and for the reasons stated above, we accordingly as to: 1. Program 1701-M, Jacket 772-742, Print Order 38, deny the appeal from the termination for default. 2. Program 1736-S, Print Orders 12, 13, 14, deny the appeal from the termination for default.